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Player-compatible learning and player-compatible equilibrium

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  • Fudenberg, Drew
  • He, Kevin

Abstract

Player-Compatible Equilibrium (PCE) imposes cross-player restrictions on the magnitudes of the players' “trembles” onto different strategies. These restrictions capture the idea that trembles correspond to deliberate experiments by agents who are unsure of the prevailing distribution of play. PCE selects intuitive equilibria in a number of examples where trembling-hand perfect equilibrium (Selten, 1975) and proper equilibrium (Myerson, 1978) have no bite. We show that rational learning and weighted fictitious play imply our compatibility restrictions in a steady-state setting.

Suggested Citation

  • Fudenberg, Drew & He, Kevin, 2021. "Player-compatible learning and player-compatible equilibrium," Journal of Economic Theory, Elsevier, vol. 194(C).
    • Handle: RePEc:eee:jetheo:v:194:y:2021:i:c:s0022053121000557
    DOI: 10.1016/j.jet.2021.105238
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    Cited by:

    1. Clark, Daniel & Fudenberg, Drew & He, Kevin, 2022. "Observability, dominance, and induction in learning models," Journal of Economic Theory, Elsevier, vol. 206(C).
    2. Milgrom, Paul & Mollner, Joshua, 2021. "Extended proper equilibrium," Journal of Economic Theory, Elsevier, vol. 194(C).

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    More about this item

    Keywords

    Non-equilibrium learning; Equilibrium refinements; Trembling-hand perfect equilibrium; Weighted fictitious play;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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